Daiwa Securities Soars to New Heights in Q4 2024, But What Lies Ahead?

Daiwa Securities Group (DSECF) has delivered a stellar performance in its fiscal year 2024, with record revenues and shareholder returns driving optimism. Yet, the absence of forward guidance leaves investors wondering whether this momentum can sustain in an uncertain global economy.

A Year of Breakthroughs in Wealth and Asset Management

The Wealth Management Division emerged as the star performer, with ordinary income surging 21.8% year-on-year (YoY) to ¥224.7 billion, fueled by strong demand for total asset consulting services. Asset-based revenues hit ¥111.7 billion, up 20.4% YoY, while net asset inflows smashed previous records at ¥1.57 trillion (+89.3% YoY). This growth was bolstered by record-breaking inflows into stock investment trusts (¥174.6 billion net increase in Q4 alone) and robust sales via wrap accounts (¥94.2 billion net inflow). The division’s success underscores Daiwa’s ability to capitalize on rising affluence and client demand for comprehensive wealth solutions.

The Asset Management Division also reached new highs, with net operating revenues of ¥102.5 billion and ordinary income of ¥77.4 billion, both all-time records. However, this division’s Q4 performance was uneven: while securities asset management remained profitable, alternative asset management posted a loss, likely due to delayed exits in real estate and private equity markets. This highlights a potential vulnerability if global deal-making slows.

Global Investment Banking and Base Income Drive Resilience

Daiwa’s Global Investment Banking (GIB) segment delivered a record ¥85.1 billion in net operating revenues, supported by large-scale M&A and primary market deals. Meanwhile, the Base Income—a composite of core businesses including wealth and real estate management—jumped 20.4% YoY to ¥137.5 billion, reflecting steady demand across Daiwa’s foundational services.

Financial Metrics Signal Strength, but Q4 Saw a Dip

On a consolidated basis, Daiwa’s ordinary income soared 28.7% YoY to ¥224.7 billion, the first time exceeding ¥200 billion in nearly two decades. Net operating revenues grew 9.3% to ¥645.9 billion, while ROE improved to 9.8% from 8.3% in FY2023. However, Q4’s ordinary income fell 19.1% quarter-on-quarter (QoQ) to ¥51.0 billion, primarily due to weaker exits in real estate and alternative assets. This underscores the volatility inherent in certain segments and the importance of cross-divisional balance.

Shareholder Returns Take Center Stage

Daiwa’s commitment to shareholders is undeniable. The company announced a record dividend of ¥56 per share (a 51.1% payout ratio) and authorized a ¥50.0 billion share repurchase program—the largest in its history. Combined, these initiatives yield a total payout ratio of 83.6%, signaling confidence in its financial health and a focus on rewarding investors.

The Elephant in the Room: No Forward Guidance

Despite the strong results, Daiwa’s management offered no explicit guidance for FY2025. This silence contrasts with peers who typically provide revenue or earnings targets, leaving investors to speculate about future growth drivers. The absence of strategic outlook raises questions about whether Daiwa’s success is tied to one-time factors or sustainable trends.

Conclusion: A Golden Quarter, But Challenges Loom

Daiwa’s Q4 results are undeniably impressive, with record revenues and shareholder returns marking a turning point for the firm. The Wealth and Asset Management divisions have clearly found their stride, leveraging Japan’s growing wealth and global investment trends. However, the lack of forward guidance and Q4’s dip in ordinary income suggest caution is warranted.

Investors should scrutinize Daiwa’s exposure to volatile markets—particularly in real estate and alternatives—and monitor its ability to sustain momentum without clear strategic roadmaps. With ROE at 9.8% and a historically high payout ratio, Daiwa’s performance hinges on maintaining its current operational efficiency while navigating macroeconomic headwinds.

For now, the earnings report is a win for shareholders, but the next chapter remains unwritten.